I'm journalist-in-residence with the Washington-based Foundation for Defense of Democracies, heading the FDD's Investigative Reporting Project. For almost 30 years I've been covering the international scene, reporting from Asia, the former Soviet Union, Latin America and the Middle East. From 1984-2002 I wrote for The Wall Street Journal, out of Hong Kong, Moscow and New York. In 2005 I won the Eric Breindel Award for ground-breaking reporting on the United Nations Oil-for-Food program, and in 1990, for on-site reporting and commentary on China's 1989 Tiananmen uprising, I won an Overseas Press Club Citation for Excellence. I blog at http://pajamasmedia.com/claudiarosett/ .

2/27/2012 @ 8:41AM3,487 views

Iran Sanctions: A Tale of Two Fleets

As financial sanctions tighten on Iran, a shift has appeared in the shipping patterns of Iran’s main cargo fleet, the state-owned Islamic Republic of Iran Shipping Lines, or IRISL. Blacklisted by the U.S. since 2008, IRISL has made an art out of dodging sanctions to stay afloat and keep sailing the high seas. But today, an unusual number of IRISL-linked cargo ships are hugging Iranian ports. Many have been there for weeks.

The likeliest explanation is that new sanctions, designed to cut off Iran from the global financial system and bedevil its oil exports, are doing serious damage to its shipping business. Another, more sinister possibility, is that Iran’s government is battening down some of its shipping assets, as the showdown escalates over its nuclear program. Or both?

Not so long ago, many of these same IRISL-linked ships were far more widely dispersed around the globe, sailing right through a net of sanctions cast by the U.S., European Union and United Nations. Since the U.S. blacklisted IRISL in 2008 for providing services to Iran’s military and proliferation ventures, Iran’s regime has adapted by camouflaging the bulk of its fleet, renaming and reflagging many of the ships and transferring ownership to front companies with blandly generic names such as Alpha Effort or Melodious Maritime.

By last year, this had become a shell game in which the U.S. had blacklisted more than 155 IRISL-affiliated ships, as well as scores of ship-owning front companies, from Hong Kong to Panama. The European Union and sundry other countries were taking similar measures. But the ships themselves kept calling at ports around the globe, from Iran to the Far East, from Malta to Mexico.

To a significant extent, that’s now changed, to judge by a survey this past week of 104 IRISL-linked major cargo ships, a sample that includes roughly two thirds of the total IRISL-linked fleet blacklisted by the U.S. Treasury. Regardless of current names, flags and shell companies, these vessels can be identified by their unique seven-digit hull numbers, known as IMO numbers, which are issued for the lifetime of a ship. Treasury on its web site provides the IMO numbers for blacklisted IRISL-linked ships. At a Washington-based think tank, the Foundation for Defense of Democracies, with which I am affiliated, there is a ship-tracking project which has compiled the following finding, using information from the ship-tracking database IHS Fairplay, and other shipping industry sources.

Out of 104 IRISL-linked cargo ships surveyed, 62 ships, or 60%,of the total sample, are currently in or near Iranian ports. By contrast, in July, 2010, in a pattern that until a few months ago appeared roughly the norm, only 28 of these ships, or 27% of the total sample, were in or near Iranian ports. In other words, over the past 20 months, the number of these blacklisted ships sticking close to Iran has more than doubled.

Much of that change seems to have come about in recent months. For instance, last year I took a close look at 19 blacklisted IRISL-linked ships flagged to Hong Kong. They were mostly on the move, calling at a wide variety of ports, in countries such as Mexico, Argentina, South Africa, Bulgaria and China. They also called at Iran, but it was rare to see more than one or two of them in Iranian ports at the same time. Today, according to IHS Fairplay, 15 of those 19 cargo ships are in Iranian ports, and 13 of them have been there for well over a month.

The best guide to what might be happening here is the stack of stories in recent weeks about the jarring effects of new U.S. financial sanctions aimed at cutting Iran off from the world financial system. On Feb. 8, Reuters reported on commodities brokers saying that these sanctions, imposed since the beginning of the year, “are playing havoc with Iran’s ability to buy imports and receive payment for its oil exports.” Sanctions don’t forbid selling food to Iran, but Iran is having trouble finding ways to pay for it. Earlier this month, the U.K. newspaper “The Independent” reported that Iranian buyers had defaulted on payments for some $144 million worth of rice from India. In Malaysia, exporters have stopped selling palm oil to Iran, because they cannot get paid. Ukraine’s exports of maize to Iran have dropped by almost half. In the Philippines, where Iran is a major buyer of bananas and pineapples, exporters have been talking about shunning Iran, which has been late on payments.

Iran, in response, has again begun to adapt. There are reports that Iran is offering barter deals — gold bullion for grain, and oil for rice and bananas. Reuters reports that last week, for the first time anyone can remember, an Iranian supertanker loaded with crude, the Delvar, anchored at Karimun Island in the Singapore Strait. Reuters explains that Karimun “is a key offshore storage point near Asia’s biggest oil trading hub, Singapore, and is often used for ship-to-ship transfers.”

That underscores the likelihood that with dwindling access to the global financial system, and an EU oil embargo looming, Iran will turn oil into its currency. And it will try to get around sanctions by turning its oil tankers — which are not currently sanctioned — into de facto floating bank accounts, for a regime which has long treated terror networks and munitions as a higher priority than putting bananas and rice on the table.

Those tankers belong to an Iranian company called NITC, formerly the National Iranian Tanker Company. Officially privatized in 2000, NITC is nonetheless much entwined with the state-owned National Iranian Oil Company, or NIOC. NITC carries Iran’s oil to world markets, providing a vital link in the oil supply chain that has sustained Iran’s regime for more than three decades. And NITC operates the biggest tanker fleet in the Middle East, listing 39 vessels on its web site, and stating that another 22 are on order. Like the state oil company itself, NITC has so far escaped sanctions. And unlike the cargo ships of the blacklisted IRISL, NITC’s tankers are not increasingly hunkered down in Iranian ports. More than half are currently elsewhere.

All this should be of interest to U.S. lawmakers and administration officials now debating whether to blacklist NITC and its ships. It appears that sanctions are not going to stop Iran’s nuclear program. But if the Obama administration is going to keep gambling that sanctions alone will somehow turn the tide in Iran, then why leave Iran’s tanker fleet with license to bail out proliferation-linked IRISL, or anything else belonging to the Tehran regime?

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.